Derivatives and Hedging

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company enters into a limited number of derivative contracts to mitigate the cash flow risk associated with changes in interest rates on variable-rate debt and changes in foreign exchange rates on forecasted foreign currency transactions. The Company accounts for its outstanding derivative contracts in accordance with FASB ASC Topic 815, which requires all derivatives, including derivatives designated as accounting hedges, to be recorded on the balance sheet at fair value. The tables below provide information regarding the Company’s outstanding derivative contracts as of the dates indicated (in thousands, except for number of contracts).


September 30, 2020
Derivative Contract Type	Number of Contracts	Notional Amounts		Fair Value Asset (Liability), Net (3)		Balance Sheet Line Item	Unrealized Loss Recorded in AOCI/L, net of tax
Interest rate swaps (1)	4	$	1,400,000	$	(85,826)	Other liabilities	$	(84,617)
				(34,706)		Accrued liabilities
Foreign currency forwards (2)	38	211,495		(105)		Accrued liabilities	—
Total	42	$	1,611,495	$	(120,637)		$	(84,617)


December 31, 2019
Derivative Contract Type	Number of Contracts	Notional Amounts		Fair Value Asset (Liability), Net (3)		Balance Sheet Line Item	Unrealized Loss Recorded in AOCI/L, net of tax
Interest rate swaps (1)	4	$	1,400,000	$	(64,831)	Other liabilities	$	(47,164)
Foreign currency forwards (2)	176	604,858		59		Other current assets	—
Total	180	$	2,004,858	$	(64,772)		$	(47,164)

(1)Prior to June 30, 2020, the interest rate swaps were designated and accounted for as cash flow hedges of the forecasted interest payments on borrowings. As a result, changes in the fair values of the swaps were deferred and recorded in AOCI/L, net of tax effect. Upon the prepayment of $787.9 million under the Company’s Term Loan A facility and repayment of

all amounts outstanding under the 2016 Credit Agreement revolving credit facility, the Company determined that it was probable that forecasted interest payments on $200.0 million of variable rate debt would not occur. Additionally, as the variable rate debt under the Term Loan A facility was replaced by $800.0 million of fixed rate debt under the 2028 Notes, the Company de-designated all of its interest rate swaps. Note 7 — Debt provides additional information regarding the Company’s interest rate swap contracts.

(2)The Company has foreign exchange transaction risk because it typically enters into transactions in the normal course of business that are denominated in foreign currencies that differ from the local functional currency. The Company enters into short-term foreign currency forward exchange contracts to mitigate the cash flow risk associated with changes in foreign currency rates on forecasted foreign currency transactions. These contracts are accounted for at fair value with realized and unrealized gains and losses recognized in Other income (expense), net because the Company does not designate these contracts as hedges for accounting purposes. All of the outstanding foreign currency forward exchange contracts at September 30, 2020 matured before October 31, 2020.

(3)See Note 11 — Fair Value Disclosures for the determination of the fair values of these instruments.

At September 30, 2020, all of the Company’s derivative counterparties were investment grade financial institutions. The Company did not have any collateral arrangements with its derivative counterparties and none of the derivative contracts contained credit-risk related contingent features. The table below provides information regarding amounts recognized in the accompanying Condensed Consolidated Statements of Operations for derivative contracts for the periods indicated (in thousands).


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Amount recorded in:	2020		2019		2020		2019
Interest expense (income), net (1)	$	7,165	$	(1,504)	$	17,679	$	(6,015)
Other expense, net (2)	179		4,367		22,494		5,064
Total expense (income), net	$	7,344	$	2,863	$	40,173	$	(951)

(1)Consists of interest expense (income) from interest rate swap contracts.

(2)Consists of net realized and unrealized gains and losses on foreign currency forward contracts, gains and losses on de-designated interest rate swaps and $10.3 million of expense during the nine months ended September 30, 2020 on interest rate swap contracts due to forecasted interest payments no longer being probable as a result of the repayment of all amounts outstanding under the 2016 Credit Agreement revolving credit facility and the prepayment of $787.9 million under the Term Loan A facility and on June 30, 2020.